AHDB Pig Market Weekly

AHDB Pig Market Weekly - 17 July 2014

EU slaughtering in April fell by almost 3% compared with the same month in 2013 to 20.5 million head although they were still higher than in March this year despite the shorter working month.

Lower EU pig slaughterings

The sharp fall in April reflects high slaughtering in April 2013. Easter holidays meant fewer working days this year as last year Easter was in March. In fact on a per working day basis slaughterings were 7% higher on the year earlier. This brought EU pigmeat production to just over 1.8 million tonnes, down almost 4% from April last year as carcase weights have also been lower.

Pig throughputs on Eastern European markets recorded large increases led by a 23% rise in Poland compared with April 2013 partly given increased imports of weaners for finishing in Poland. Similarly, there were higher slaughterings in Hungary and Romania of 12% and 7% respectively. However, these increases failed to offset the declines for the other key member states. The major producers in Western Europe recorded significant declines, with Dutch and German throughputs down by 14% and 4% respectively on April last year while throughputs at Danish plants were 12% lower. In addition, 4% fewer pigs entered Spanish abattoirs and there was also a fall in Italy. However, it is worth noting the shorter working month, compared with April 2013.

Good carcase classification results for the UK

According to the data published by the European Commission the UK has some of the best results in the EU as in 2013 78% of commercial pigs slaughtered were classified as S grade and a further 21% were grade E. There has been a steady improvement in the distribution of pig carcases by grade in the last 30 years as at the beginning of the period the majority of pigs were classified as I/U. However it is worth noting that there was a possible change in methodology around 2005.

Marked improvements in classification have taken place across the EU over the years. However, the UK enjoys a particularly good performance as in the EU as a whole only 51% were classified as grade S in 2013 and 38% grade E. This may be partly the result of the fact that pigs slaughtered in the UK include entire males and that carcase weights are lower. Only Spain had such good results as the UK in 2013 whereas the performance of Danish pigs was somewhat inferior with 59% classified as grade S and 38% grade E. In contrast of the other major producers grade E was the most important category in Germany and the Netherlands.

As per European Union rules, abattoirs that slaughter more than 200 pigs a week are required to classify pig carcases, under the SEUROP grid system. The main aims of classification are to compare price quotations across the EU member states, enable monitoring of the market situation, reward producers for delivering the required carcases and to calculate the EU reference price.

DAPP down for the second consecutive week

The EU spec DAPP for the week ended 12 July edged down to 162.62p per kg. This was 0.25p lower than the week earlier and the annual difference continued to widen, with the latest week showing a reduction of around 6p. Finished pig prices generally strengthen during this time of the year helped by barbeque demand and the decline in the last couple of weeks is somewhat surprising. During the same week, supplies fell short (down over 1%) compared with the year earlier, at 162,400 head. However, for the year so far, pig supplies are still ahead of the previous year level. The average carcase weight for the week ended 12 July came down marginally to 78.63kg and was around 400g lower than the same week in 2013.

The new standard pig price (SPP) also fell back, by 0.31p to 162.55p per kg, for the week ended 12 July. This was the lowest since the SPP started in April. The GB APP for the previous week (ended 5 July) was 164.60p per kg, marginally down on the week earlier.

The 30kg weaner price mirrored the finished pig prices, whereby prices in the market fell to £55.36 per head. This was around £1 lower than the previous week. Industry reports suggest little change in supplies traded and therefore the decline in the weekly price is a likely result of weaker demand. At the latest price, the annual difference was a positive £1.48 gap the lowest so far this year. There was a similar trend in the 7kg weaner market, where prices came down by 22p to £40.09 per head from the week previous given an increase in the volumes traded. However, this was marginally higher than the same week in 2013.

Due to some issues with the sample size, BPEX is unable to publish a sow price at the present time but industry reports indicate a weaker trade influenced by falling prices on the German market both of clean pigs and sows. The German sow price this week has fallen by 6% after having edged up in previous weeks.

Brazilian export prices rising fast

In the first half of 2014, Brazil exported just over 200,000 tonnes of pork, almost the same as a year earlier. However, the shortage of pork on several key markets meant that prices rose rapidly. Over the six month period, the value of exports was up by more than a quarter, at R$1.46 billion. To some extent this was down to the depreciation of the Brazilian real, which meant that prices were already 17% higher than a year before in January, at R$6.60 per kg, despite being almost unchanged in US dollar terms. However, price rises then accelerated and by June had reached R$9.03 per kg, 61% up on the year.

In part, the price rises were driven by demand from Russia, Brazil’s leading export market, given supply shortages there following the ban on EU pork imports (and the ongoing restrictions on US product). Brazil supplied 21% more pork to Russia than last year and unit prices were up by more than half across the half year and were nearly double in June. Some smaller markets, such as Angola, Singapore and Albania also took more Brazilian pork. However, these rises were offset by a fall in shipments to Hong Kong and, more significantly, a collapse in trade with Ukraine. Various restrictions meant that this trade fell from over 64,000 tonnes in the first half of 2012, to less than 3,000 tonnes this year.

Lower UK household pork purchases

Shoppers’ spending on pork was down 3.5% year on year in the 12 weeks ended 22 June, according to the latest Kantar Worldpanel data while volume purchases were down 2%. The reduction in spending was overwhelmingly driven by chops/steaks which were down 9% year on year while shoulder roasting joints were 7% lower. Volume sales of shoulder roasting joints were by contrast static given a sharp price decline although chops/steaks were down almost 8%. Belly was the only other cut to experience a decline in volumes. A fall in the number of households purchasing was the biggest driver of the decline in chops/steaks followed by households buying less frequently. This development will have been affected by the fact that amongst the major multiples there were fewer promotions compared to a year ago. The discounters continue to buck the decline in sales trend as expenditure on chops/steaks was up an impressive 38%.

Spending on sausages was up 2% over the latest period compared with a year earlier even though purchases were down 3%. Growth came from all categories with the exception of premium sausages which were down against the strong performance of a year ago. Expenditure on bacon was up 3% on the same period of last year as volumes were up despite prices experiencing a small increase. Sliced cooked meats also enjoyed a good demand while spending on ham was up 4% with the hard discounters once again enjoying the strongest performance.

Global growth in meat production to slow down

According to the global outlook just published by FAO and OECD, world meat production is expected to show a smaller rate of growth of 1.6% per annum in the 2014 to 2023 period compared with the previous 10 years. Projections show a somewhat smaller increase, of 1.1% per annum, in pork production which would be lower than the 2.0% per annum historical growth. Demand forces are set to place poultry as the largest meat sector, overtaking pork by 2020, helped also by its lower land requirement and shorter production cycles.

Likewise, global meat consumption is also likely to increase by 2023, to 36.3kg in retail weight per capita, with growth concentrated on developing countries especially in Asia. Given ongoing population growth per capita pig meat consumption is expected to increase only marginally to 12.7 kg retail weight by 2023. Total global meat and pig meat trade is also likely to grow at a slower rate between 2014 and 2023 compared with the last decade.

China will continue to be a key player in the global pig meat market. However the rate of growth in production is projected to slow down to 1% per annum compared with 2.5% per annum in the 2004 to 2013 period. The rate of growth in consumption will also slow down to nearer 1% per annum as it approaches saturation levels and consumers diversify into other protein sources. However, the report still expects Chinese pig meat imports to continue to increase sharply to 1.4 million tonnes cwe by 2023 which would make it the largest global importer. United States production growth is also projected to slow down to less than 0.8% per annum with an even smaller increase projected for the EU.

Feed market update

In the UK the downward price trend for feed wheat has continued throughout the past week and prices closed at another new contract low of £128.80/t on Tuesday (15 July), down £4.20/t on the previous week. Dec-14 Chicago wheat prices also hit a new contract low on Friday (11 July), at $201.24/t, falling $12.04/t since the beginning of last week. Prices settled up slightly by this Tuesday at $206.11/t. Similarly, Nov-14 Chicago maize futures also hit a contract low last Friday, at $151.48/t, and since edged back further settling at $150.29/t by Tuesday’s close. The even more favourable global cereal supplies situation continues to reduce prices.

Global oilseed prices remain in their downward trend with strong supply forecasts for 2014 acting as the focus. Paris Nov-14 rapeseed futures traded below the €330/t level for the first time on Friday, but have since recovered slightly closing at €330.25/t on Tuesday, down €8.75/t on the previous week. Prices for Chicago soyabeans closed on Tuesday at $399.09/t, down $11.02/t from the previous week. UK Hi-Pro soyameal prices (ex-store, east-coast) were £315/t as at 11 July, down £14/t from the previous week. UK rapemeal prices (34%, ex-mill, Erith, July delivery) also declined, by £4/t, over the week and closed on Friday at £180/t.

The annual AHDB/HGCA Planting and Variety Survey was published last week. Read more at www.hgca.com/markets.